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This Is How It Happened

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Guest rollover

Joel,

 

Sorry for the delay in responding, I just now read your reply. Okay, in 1980 I was like 8 years old. I have no idea what the MEA was at that time. Tell me what it was, I'll run the numbers, and then we can come to a conclusive decision on the reality of this happening. My hunch is that it was very possible (the twenty fund AVERAGED 20+% for more than 10 years), but let's wait to see what the numbers indicate...

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Erik,

 

What does age got to do with it ---got to do with it!! Regardless of age one needs to do elementary research in order to find out what the MEA was from 1980-87.

 

Having said that, one age 31 should be able to correct his own admitted mistakes rather than request: "tell me what it was" of the person who brought the material error to your attention.

 

We await your revised post with corrections .

 

Peace and Hope,

Joel

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Guest Erik

Joel,

 

I guess you take this more seriously than I do. It appears that you see this as a challenge to 'prove' me wrong. Clearly I was wrong about the MEA, does it make you feel better to have me admit it?

 

I really don't care enough to look it up, so either you do it or we just won't find out if this was feesible. Or you could do the calculations yourself. If you get your kicks out of picking out obscure facts from anonymous web forums then your really need to get a life pal...

 

Erik

 

PS In Texas you could contribute (and still can) over $15K in a 403(b) in the early 80's. That is because the Optional Retirement Plan is considered a 403(b) plan. Based on the information presented in the case, I have no way of knowing if this account was funded via ORP contributions.

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Guest rollover

Erik---

 

Your personal attacks are quited unbecoming and serve no purpose at all.

 

let me get you right---I should supply you with the accurate MEAs (something that you could find out for yourself) and you'll "run the numbers" Thanks but no thanks. I did not assist you with YOUR original post so why should I do the MEA research when you know how to do it yourself? Apparently you are not so eager to "run the numbers", numbers that are accurate.

 

Additionally, ALL of us "regulars" take pride in the accuracy of our posts. You apparently do not---that is unfortunate. We abhor wingers and detest the Yellow Journalism they practice. If we (us regulars) are wrong we feel it is our PERSONAL RESPONSIBILITY TO CORRECT THE ERROR if we can, NOT TO ELICIT THE ASSISTANCE OF THE PARTICIPANT WHO FOUND THE ERROR. C'mon Erick---give us a break!

 

Your response reveals that you most probably knew, from the outset, that the MEAs from 1980-87 were far less than $10,000 per year but for reasons known only to yourself you decided not to do the elementary research required to reach an accurate conclusion. Shame Shame on you.

 

I assure you that all of your future posts will be suspect if you do not revise the erroneous conclusion you reached on this topic. PLEASE DO NOT MAKE THE CHOICE MINE WHEN WE ALL KNOW IT IS CLEARLY YOURS!!

 

Peace,

Joel

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Guest Erik

Mr. Joel,

 

I was at a funeral this morning. The message was as follows: The greatest tribute to one's life is the number of people that they loved. Sage advice...

 

I am not a combatant (well sometimes I am but I wish to move aways from that), nor do I wish to prove anyone right or wrong. We could work together to find the answer to this question and that, I hope, is the goal of all of this. If your goal is to prove that I made a mistake, consider your point made.

 

Thank you for pointing out that contributing $10K was not possible (less the exception I noted) in this scenario. I was basing that dollar amount off of another post from the thread. I did not realize the scrutiny that my post would encounter. My remarks were off the cuff and mostly hypothetical.

 

The purpose of my statement "Get a life" is that I believe your taking this too seriously. I still believe that you are taking this too seriously however was unaware that you would be effected by my words and wish to issue you an apology. I have not walked a mile in your shoes so I withdraw my judgement.

 

Again, what I really would like is to answer the posed question.

 

Sincerely yours,

 

Erik

 

PS I have been unable to find any web site with historical MEA amounts. If you could direct me to the location, I would appreciate your help.

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Maybe I can help with some historical information.

 

Beginning in 1987, elective deferrals were limited by section 402(g). In 1987 thru 1997, the limit was $9,500. In addition, the $3,000 per year catch up was available to those with 15 years of service or more, subject to the $15,000 lifetime limit on that catch up.

 

The exclusion allowance formula was always the familiar "20% of includible compensation times years of service, minus amounts previously excluded." While the formula didn't change until it was repealed, its interpretation has been the subject of many debates.

 

Contributions were also limited by section 415©. Annual additions could not exceed the lesser of 25% of compensation or a dollar limit. The dollar limit was:

 

1980 - $36,875

1981 - $41,500

1982 - $45,475

1983 - $30,000 (and remained at this level until 2001)

 

So, from 1980 to 1986, it was possible that a participant could contribute as much as the aforementioned dollar limit, if their exclusion allowance was high enough. Beginning in 1987, this was reduced so that the most someone could contribute was the elective deferral limit of $9,500.

 

Hope this is of some benefit. Let me know if you would like any additional information.

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Guest Erik

Thanks for the info Michael,

 

Joel: I thought of another way to answer this question. Given the market returns from 1988-2000, an investor with approximately $110,000 on 1/1/88 would have approximately $1.4 Million now IF they got out of the market sometime in 2000 and used either the Janus 20 fund or the Fidelity Magellen (other funds too but those are the obvious ones). Was it possible to accumulate $110,000 in a 403(b) account from 80-87? Given Michael's figures, I'll say yes: At 12% ARR from 1/1/80 - 1/1/88 one would need to have contributed $745 per month ($8950 per year) to accumulate that amount.

 

Let me finsish with a quote, "If we (us regulars) are wrong we feel it is our PERSONAL RESPONSIBILITY TO CORRECT THE ERROR if we can." That quote looks pretty obnoxious now doesn't Joel? I think we both learned our lessons and are hopefully the better for it : )

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Guest rollover

Thanks for the info Michael,

 

Joel: I thought of another way to answer this question. Given the market returns from 1988-2000, an investor with approximately $110,000 on 1/1/88 would have approximately $1.4 Million now IF they got out of the market sometime in 2000 and used either the Janus 20 fund or the Fidelity Magellen (other funds too but those are the obvious ones). Was it possible to accumulate $110,000 in a 403(b) account from 80-87? Given Michael's figures, I'll say yes: At 12% ARR from 1/1/80 - 1/1/88 one would need to have contributed $745 per month ($8950 per year) to accumulate that amount.

 

Let me finsish with a quote, "If we (us regulars) are wrong we feel it is our PERSONAL RESPONSIBILITY TO CORRECT THE ERROR if we can." That quote looks pretty obnoxious now doesn't Joel? I think we both learned our lessons and are hopefully the better for it : )

 

+++++++++++++++++++++++++++++++++++++++++++++++++++++

 

Erik----Calm down, please. In your last post you seemed to apologize and now you are back with the personal attacks. C'mon now let's remain focussed.

 

I never said it was impossible to attain that $1million plus figure. I simple said that you are wrong to use $10,000 as an annual MEA for each year 1980-1987 inclusive. I still question your use of $8950 per year as a contribution. This assumes that the employee earned an average of $45,000 per year for the 8 year period ending on December 31, 1987. I feel it was the rare 403b employee who earned an average annual salary of $45,000 during that period of time. The average 403b employee today doesn't earn much more than $50,000.

 

But let's say this hypothetical investment genuius did have $110,000 on January 1, 1988. Now you tell us it is possible to have a balance of $1.4 million today PROVIDED he was FULLY INVESTED in the Janus 20 or the Magellan fund from 1980-2000 and then, ENTIRELY OUT OF CHARACTER, decided to practice the art of MARKET TIMING and got out of the market with all of his equity holdings in 2000 right at the market top. GIVE US A BREAK!! You would have us believe that this stock market wizzard has been in the money market with all of his holdings for the last 2-3 years. Let us know when he gets back in. I'm sure we all want to follow him like white on rice.

 

I trust you see that with your assumptions you can only reach YOUR PRE DETERMINED objective of reaching that million plus figure by adopting an almost impossible and totally unrealistic scenario. Us "regulars" also practice realism.

 

Erik, I thought you would use Michael's figures in a more realistic and meaningful way. For example, take a highly compensated person--like a large city's Superintendent of Schools. Let's assume his/her salary was large enough to support the maximums that Michael listed. You could use the SP 500 as your investment vehicle and NOT BE "FORCED" TO TIME THE MARKET (AFER 20 YEARS OF BEING FULLY AND CONTINUOUSLY INVESTED) IN ORDER TO REACH THE $MILLION PLUS FIGURE. Don't you feel this hypothetical is much more DOABLE AND REALISTICE?

 

Peace,

Joel

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Guest John Micheal

Joel,

 

You're a jerk. He proved you wrong and now you don't have the guts to admit it. Guys like you burn me up. WAY TO GO ERIK! Erik was right, you do need to get a life!

 

Joel are you French?

 

JM

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Guest Ed

I originally asked this question about how a person could do this. I am happy to see the ongoing discussion although it has not always been civilized. The respectful exchange of ideas/information/perspectives on this site is beneficial and appreciated. The insults are not helpful.

 

It seems to me that a person would, indeed, need to have been very highly paid from 1980-88 in order to contribute 8000-10000 during those years. A comment earlier indicated that Al, I think his name was, was merely lucky and not necessarily savvy for having achieved this feat of 1.4 mill.

 

My purpose for the original question was to gain insight as to what strategies are effective with 403b/457b investing. Again, any respectful thoughts/comments would be appreciated.

 

Thanks and take care. Ed

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Guest rollover

Ed,

 

I did some "research" on this thread and as we all know the devil is in the detail-----Al stated: "We - my wife and I - started a 403b in 1980." Does this mean both contributed to their own account? It could be insofar as both were eligible for a 403b because each has a STRS pension. Just a minor detail I thought I would share with all those that are well meaning. Only Al and his wife know the answer. Maybe they will clarify this for us.

 

Peace and Hope,

Joel

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403(b)wise and 457(b)wise have launched a new and improved Discussion Board! enter now

 

 

 

 

 

 

POST 403(B) AND 457 PLAN QUESTIONS AND ANSWERS

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Subject: Now Retired

Author: Al

Date: 12/23/2002 11:09 pm PST

 

So we're now retired-have been for 14 years. We - my wife and I - started a 403b in 1980. We now have a large amount in a 403b GNMA mutual fund account. About 4.5% is required minimum distributions. What do we do now? I mean, what about avoiding inheritance taxes for our children? Do we just spend the money, roll it over, let it sit there, or what? I realize these questions may raise an eyebrow or two, but they are real, even though we are really happy in our success in accumulating this nice nest egg. Maybe some attention can be given to the need for advice to retirees like us as well as those presently planning for a good retirement. We are there - and need to know if we are doing the best things.

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Joel, thanks for the correction. Obviously, I must have overlooked the fineprint. This makes more sense. Appreciate your thoughts. Ed

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